YUE YUEN INDUSTRIAL (HOLDINGS) LIMITED - HKEX :: HKEXnews
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Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong
Limited take no responsibility for the contents of this announcement, make no
representation as to its accuracy or completeness and expressly disclaim any liability
whatsoever for any loss howsoever arising from or in reliance upon the whole or any
part of the contents of this announcement.
YUE YUEN INDUSTRIAL (HOLDINGS) LIMITED
裕 元 工 業（ 集 團 ）有 限 公 司 *
(Incorporated in Bermuda with limited liability)
(Stock Code: 00551)
UNAUDITED CONSOLIDATED RESULTS
FOR THE THREE MONTHS ENDED MARCH 31, 2020
Summary
The Directors of Yue Yuen Industrial (Holdings) Limited announce the unaudited
consolidated results of the Group for the three months ended March 31, 2020. This
announcement is made as part of the Company’s current practice to publish its
financial results quarterly and pursuant to paragraph 13.09(2) of the Listing Rules and
Part XIVA of the SFO.
The unaudited consolidated loss attributable to owners of the Company for the three
months ended March 31, 2020 was approximately US$56.3 million.
The directors (the “Directors”) of Yue Yuen Industrial (Holdings) Limited (“the
Company”) are making this announcement of the unaudited consolidated results of the
Company and its subsidiaries (the “Group”) for the three months ended March 31, 2020
in line with its current practice to publish the Group’s financial results quarterly and
pursuant to paragraph 13.09(2) of the Rules Governing the Listing of Securities on The
Stock Exchange of Hong Kong Limited (the “Listing Rules”) and Part XIVA of the
Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) (the “SFO”).
* For identification purpose only
1Consolidated Income Statement
For the three months ended March 31, 2020
For the three months
ended March 31,
2020 2019
(Unaudited) (Unaudited)
US$’000 US$’000
Revenue 1,969,468 2,479,385
Cost of sales (1,553,572) (1,854,676)
Gross profit 415,896 624,709
Other income 38,705 34,648
Selling and distribution expenses (234,161) (313,889)
Administrative expenses (184,994) (158,912)
Other expenses (53,957) (62,361)
Finance costs (20,721) (24,526)
Share of results of associates 3,820 1,007
Share of results of joint ventures 1,080 3,703
Other gains and losses (20,198) 6,245
(Loss) profit before taxation (54,530) 110,624
Income tax expense (10,763) (22,550)
(Loss) profit for the period (65,293) 88,074
Attributable to:
Owners of the Company (56,281) 75,494
Non-controlling interests (9,012) 12,580
(65,293) 88,074
2Consolidated Statement of Comprehensive Income
For the three months ended March 31, 2020
For the three months
ended March 31,
2020 2019
(Unaudited) (Unaudited)
US$’000 US$’000
(Loss) profit for the period (65,293) 88,074
Other comprehensive (expense) income
Items that will not be reclassified subsequently to
profit or loss:
Fair value (loss) gain on equity instruments at fair
value through other comprehensive income (10,902) 6,701
Share of other comprehensive expense of an
associate (1,097) (1,988)
(11,999) 4,713
Items that may be reclassified subsequently to
profit or loss:
Exchange difference arising on the translation of
foreign operations (19,235) 23,512
Share of other comprehensive (expense) income of
associates and joint ventures (7,147) 4,763
Reserve released upon disposal of an associate (270) –
(26,652) 28,275
Other comprehensive (expense) income for the
period (38,651) 32,988
Total comprehensive (expense) income for the
period (103,944) 121,062
Total comprehensive (expense) income for the
period attributable to:
Owners of the Company (86,980) 99,616
Non-controlling interests (16,964) 21,446
(103,944) 121,062
3Basis of preparation and principal accounting policies
The unaudited consolidated results for the three months ended March 31, 2020 have been
prepared on the historical cost basis except for certain properties and financial
instruments, which are measured at revalued amount or fair values as appropriate.
The accounting policies and methods of computation used in the unaudited consolidated
results for the three months ended March 31, 2020 are the same as those followed in the
preparation of the Group’s annual financial statements for the year ended December 31,
2019.
In the current period, the Group has applied, for the first time, certain amendments to
Hong Kong Financial Reporting Standards (“HKFRSs”) issued by the Hong Kong
Institute of Certified Public Accountants which are mandatory effective for the annual
period beginning on or after January 1, 2020 for the preparation of the Group’s unaudited
consolidated results for the three months ended March 31, 2020. The adoption of these
amendments to HKFRSs does not have material impact on the Group’s results and
financial positions for the current or prior periods.
MANAGEMENT DISCUSSION AND ANALYSIS
Results
The Group recorded revenue of US$1,969.5 million in the three months ended March 31,
2020, representing a decrease of 20.6% compared to revenue of US$2,479.4 million
recorded in the same period of 2019. The loss attributable to owners of the Company
was US$56.3 million, compared to a profit attributable to owners of the Company of
US$75.5 million recorded in the same period of 2019. The fall in revenue and the loss
attributable to owners of the Company was mostly attributed to the 2019 Novel
Coronavirus (“COVID-19”) pandemic, which significantly impacted the Group’s
operations.
During the period, the Group recorded a non-recurring loss of US$20.2 million, which
included a loss of US$33.7 million due to fair value changes on financial instruments at
fair value through profit or loss (“FVTPL”) that was partly offset by a one-off gain of
US$11.4 million on the partial disposal of an interest in a joint venture. In the same
period of 2019, the Group recorded a non-recurring profit of US$6.2 million, which
included a gain of US$5.9 million due to fair value changes on financial instruments at
FVTPL. Excluding all items of non-recurring in nature, the recurring loss attributable to
owners of the Company amounted to US$36.1 million.
4Revenue
Total revenue attributable to footwear manufacturing activity (including athletic shoes,
casual/outdoor shoes and sports sandals) during the period decreased by 8.9% to
US$1,169.4 million, whereas the volume of shoes shipped decreased by 12.5% to 71.5
million pairs. The decrease was mostly due to shipment delays amid lower operating
efficiency at some of the Group’s manufacturing facilities in China and other countries
resulting from the COVID-19 pandemic. The pandemic delayed work resumption at the
Group’s factories in China after the Lunar New Year; it also adversely impacted its
supply chain, resulting in a shortage of certain raw materials. This also led to additional
production capacity adjustments in China and other countries. The average selling price
increased by 4.1% to US$16.36 per pair, as compared with the same period of last year.
The Group’s total revenue with respect to the manufacturing business (including
footwear, as well as soles, components and others) during the period was US$1,261.4
million, representing a decrease of 9.6% as compared with the same period of last year.
Total Revenue by Product Category
For the three months ended March 31,
2020 2019
US$ US$ change
million % million % %
Athletic Shoes 1,034.9 52.5 1,017.2 41.0 1.7
Casual/Outdoor Shoes 104.1 5.3 229.9 9.3 (54.7)
Sports Sandals 30.4 1.5 36.7 1.5 (17.2)
Soles, Components & Others 92.0 4.7 111.5 4.5 (17.5)
Apparel Wholesale (TCHC
Group)* N/A N/A 108.0 4.3 N/A
Retail Sales – Shoes, Apparel,
Commissions from
Concessionaire Sales and
Others 708.1 36.0 976.1 39.4 (27.5)
Total Revenue 1,969.5 100.0 2,479.4 100.0 (20.6)
* TCHC Group was disposed on May 31, 2019
5During the period, the revenue attributable to Pou Sheng, the Group’s retail subsidiary,
decreased by 27.5% to US$708.1 million, compared to US$976.1 million in the same
period of last year. In RMB terms (Pou Sheng’s reporting currency), revenue during the
first three months in 2020 decreased by 25.0% to RMB4,947.1 million, compared to
RMB6,597.0 million in the same period of last year. The decrease was a result of various
strict control measures implemented by the Chinese government to contain the spread of
COVID-19, which resulted in the temporary closure of Pou Sheng’s business offices and
retail stores between Lunar New Year and mid-March 2020.
Gross Profit
During the period, the Group’s gross profit decreased by 33.4% to US$415.9 million.
The gross profit of the manufacturing business decreased by 21.9% to US$198.2 million
whilst the gross profit margin contracted by 2.5 percentage points to 15.7%, as compared
to the same period in 2019. The decrease in the gross profit margin for the manufacturing
business was primarily due to the impact of COVID-19 on the Group’s operations and
adjustments made to its production capacity.
Selling & Distribution Expenses and Administrative Expenses
The Group’s total selling and distribution expenses during the period amounted to
US$234.2 million (2019: US$313.9 million), equivalent to approximately 11.9% (2019:
12.7%) of revenue.
Administrative expenses for the period were US$185.0 million (2019: US$158.9
million), equivalent to approximately 9.4% (2019: 6.4%) of revenue.
Share of Results of Associates and Joint Ventures
During the period, the share of results from associates and joint ventures was a combined
profit of US$4.9 million, compared to a combined profit of US$4.7 million recorded in
the same period of last year.
Outlook
The spread of COVID-19 to the US and Europe had severely dampened global consumer
demand for athletic footwear, the chain effect of which is negatively affecting both
footwear manufacturers and sports retailers. In addition, government lockdowns and
other social distancing measures being imposed in various Southeast Asian countries to
contain the COVID-19 pandemic is expected to further hinder the operating efficiency of
the Group’s manufacturing facilities in this region. This, together with uncertainty about
demand, may result in temporary factory closures and further adjustments to the Group’s
production capacity.
6There is still great uncertainty around how the COVID-19 pandemic may continue to
impact orders and sales visibility for the Group’s various business segments, which will
inevitably impact its performance throughout the remainder of 2020. In view of the
challenges and uncertainties ahead, the Group will continue to proactively monitor the
situation and impose cost control measures as appropriate. The Group will also focus on
its cash flow management, including adopting a more prudent approach when evaluating
capital expenditure projects in 2020.
By Order of the Board
Yue Yuen Industrial (Holdings) Limited
Lu Chin Chu
Chairman
Hong Kong, May 14, 2020
As at the date of this announcement, the Directors are:
Executive Directors:
Mr. Lu Chin Chu (Chairman), Ms. Tsai Pei Chun, Patty (Managing Director), Mr. Chan
Lu Min, Mr. Lin Cheng-Tien, Mr. Hu Chia-Ho, Mr. Liu George Hong-Chih, Mr. Hu Dien
Chien and Mr. Yu Huan-Chang.
Independent Non-executive Directors:
Mr. Wong Hak Kun, Mr. Ho Lai Hong, Ms. Yen Mun-Gie (also known as Teresa Yen)
and Mr. Chen Chia-Shen.
Website: www.yueyuen.com
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